Surety bonds vs. bank guarantees: a real comparison to make better decisions
- Eduardo Ramos
- Jul 7
- 2 min read
In the business world, ensuring compliance with a contract is a common need. Whether before a tax authority, a landlord, or a public works contractor, the two most common tools for backing up an obligation are a bank guarantee and a surety bond. Although both perform a similar function, their differences can have a significant impact on your company's finances and operations.
In this article, we compare their main features to help you choose the best option for your needs.
What is a bank guarantee?
It is a guarantee issued by a bank to ensure the fulfillment of a client's obligation. If the client defaults, the bank pays the beneficiary. To issue it, the bank typically requires:
A cash deposit as a guarantee.
Freeze a portion of your credit line.
Collection of additional fees and commissions.
And what is a bond?
It is a guarantee provided by a surety company (not a bank) through an ancillary contract that supports the fulfillment of an obligation. In the event of noncompliance, the surety company pays the beneficiary up to the amount secured.
To issue it, the surety company analyzes your financial profile, history, and legal documentation, but does not immobilize your capital.
Direct comparison: Surety vs. Bank Guarantee
Advantages of using a surety bond over a bank guarantee
You don't tie up resources: you can maintain liquidity to operate or invest.
Lower costs: Many surety bonds are up to 40% cheaper than guarantors.
Streamlined procedures: ideal for short-term contracts or urgent requirements.
Better technical image: A well-structured bond demonstrates professionalism, especially in bidding processes.
When might a bank guarantee be a good idea for you?
If you already have a well-established banking relationship and preferential terms.
If the counterparty (beneficiary) specifically requires a bank guarantee.
In international operations where local surety companies do not have a presence.
Conclusion: Choose wisely
Both instruments can be valid, but in most cases, a surety bond is the most efficient and cost-effective option for securing contracts without compromising your liquidity. At We Link, we analyze your case and help you choose the best guarantee for you, with professional advice and streamlined procedures.
Contact us to get a quote for your bond today and release your capital without complications.
📞 55 5401 8845
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